Do You Have An Emergency Fund?

how to budget for unexpected expenses
Financial experts suggest keeping 3 – 6 months of living expenses in an emergency fund, but what exactly constitutes an emergency?

  • Loss of job
  • Major illness
  • Huge unexpected expense

The loss of job and major illness are obviously emergencies, but then we get into a gray area when it comes to unexpected expenses.

Let's suppose your flat screen TV breaks…this is not an emergency!

What about the $200 dishwasher repair? Again, this is not an emergency.

Certainly those new tires you need for your car constitute an emergency? Sorry, you can't dig in to your emergency fund!

These three examples are what The Budget Diet refers to as “oh no” expenses or “life happens” expenses. Month after month, year after year you need to budget for things like tires, auto repairs, home repairs, vet bills and medical bills. How many times have you said, next month I'll get back on track with my budget because I won't have a car repair, and then next month comes and your air conditioner breaks? Consider “oh no” expenses or “life happens” expenses something you should count on every month, and then you won't have any surprises. I've been budgeting this way for over 20 years, and not a month has gone by with some sort of “oh no” expense!

So, what should I use my emergency fund for other than job loss or major illness? Everyone's financial situation is different, so I suggest setting a dollar limit. For example, any unexpected expense over $1000. The key word is “unexpected.” If you're driving around in a car with 200,000+ miles, you need to be financially prepared for the day it lives it's life!

If you dig into your emergency fund too often, it won't be there when you really need it?

Please leave a comment to let me know how you budget for “oh no” expenses or “life happens” expenses.


Image courtesy of: digitalart /

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